Leverage Your Good Credit to Grow
If you’ve been in business for less than two years, or have a poor business credit profile, you probably won’t qualify for the best financing. Beyond credit cards and vendor financing, your only choices may be merchant cash advances, cash flow loans or alternative (online) lenders.
Because they charge high interest rates (up to 150% APR), I advise you only use cash advances and cash flow loans as a last resort. Paying these back can put a serious strain on future cash flow.
After building strong business credit, you should be able to get approved for more favorable types of financing, like SBA loans or bank lines of credit. The application process can take longer, but the money you’ll save in lower interest rates is well worth the time and effort.
The SBA offers two types of loans: 7(a) and 504.
7(a) loans can be used for a number of business uses, including: buying a business, refinancing an existing business loan, and other big-ticket items. 504 loans can only be used for purchasing or building a commercial space.
With these loans, you also get the benefit of working with a banker. Find someone who understands your retail business. They can provide priceless advice, and want to see you succeed. If you do well, they do well.
You didn’t start a business because you enjoy dealing with the finances, but building business credit will make it much easier to grow your vision. And it doesn’t have to be painful. Technology options now exist that make it simple to build and use your business credit. Explore what’s out there. BD
Levi King is a six-time entrepreneur who’s accessed financing and business credit more than 30 times. Inspired by his challenges throughout that process, he’s now at the helm of Creditera, an online platform aiming to improve the credit landscape for each of America’s small businesses for free. Visit www.nav.com to find out more.